NIHCR Policy Analysis No. 8
Chapin White, Amanda E. Lechner
From requirements that insurers cover prescription drugs to services of chiropractors, state health benefit mandates have a long and controversial history. Critics contend mandates drive up health insurance costs, while advocates assert they ensure access to important care. The 2010 national health reform law requires states to pay for mandated benefits for certain insured people if the mandates exceed a minimum package of covered services, known as essential health benefits. Starting in 2014, almost all nongroup and small-group insurance products, including those sold through the new state insurance exchanges, must provide essential health benefits.
Essential health benefits include 10 broad categories of services, ranging from ambulatory care to hospitalization to prescription drugs. Federal guidance indicates states can define essential health benefits by selecting a benchmark from certain existing employer-sponsored health plans offered in a state. All of the benchmark plan options generally cover a wide range of benefits, including many state-mandated benefits. Federal guidance suggests that states can avoid mandate costs by choosing a benchmark option—for example a small-group plan—subject to state mandates. But, in some states, benefit mandates for nongroup plans—which are not a benchmark option—exceed mandates for small-group plans. States then must pay for mandates not included in the benchmark plan. However, even if states leave all mandates in place, their financial liability likely will be small. Maryland provides a useful example to illustrate how benefit mandates interact with essential health benefits. Almost all of Maryland’s mandates would be included as essential health benefits, regardless of which benchmark plan the state selects. Maryland’s liability in 2016 would range from about $10 million to $80 million—depending on the benchmark plan selected—if the state retained all mandates.
This article can be accessed at the National Institute for Health Care Reform Web site.